Fall in China’s exports of rare earth magnets stokes supply chain fears
by Joe Cash
BEIJING (Reuters) – China’s exports of rare earth magnets fell in September, reigniting fears that the world’s biggest supplier could use its dominance of a key component for U.S. defense firms and makers of products from cars to smartphones as leverage in trade talks.
In April and May, Beijing cracked down on global automakers with export restrictions on a range of rare earth products and related magnets, while negotiators faced triple-digit US tariffs on goods from the world’s second-largest economy.
Four months later, concern is growing that China could revert to the same strategy after Washington and Beijing unexpectedly repeated threats of new tariffs and rare earth export curbs.
This means reneging on a deal struck with the US in June to ease the flow of critical minerals.
China’s shipments of rare earth magnets fell 6.1% in September from August, customs data showed on Monday, ending quarterly gains and falling even before Beijing this month announced a dramatic expansion of its export licensing regime.
“Sharp fluctuations in rare earth magnet exports show that China knows it has an important card in international trade talks,” said Chim Lee, senior analyst at the Economist Intelligence Unit.
EXPORTS FALL FROM SEVEN-MONTH HIGHEST IN AUGUST
The decline, from a seven-month high of 6,146 tonnes in August to 5,774 tonnes in September, is in line with reports that China is already making it harder for firms to obtain licenses to export rare earth magnets.
The commerce ministry is implementing a review similar to that seen in April at the height of the trade war.
On an annual basis, September shipments increased by 17.5%.
Last week, China’s Ministry of Commerce accused the United States of causing global panic over rare earth controls by deliberately misunderstanding the restrictions and said it would approve export licenses for civilian use.
Still, analysts worry that China could once again impose restrictions on civilian commercial users aimed at denying U.S. defense firms access to critical materials.
“China’s ability to restrict rare earth exports is an extremely powerful tool,” said Dan Wang, Eurasia Group’s China director.
In addition to disrupting production, such measures would increase insecurity and dependence on China for access to critical industrial inputs, he added.
“The world needs to adapt to its own style of governance,” he said, adding that Western countries were not used to complying with monopolistic control of critical resources from countries “on the other side.”
